Has 6 years of inflation eaten away our purchasing power?

Has 6 years of inflation eaten away our purchasing power?
Has inflation eaten away our purchasing power?FW

Claim 1: There has been a price increase of 18% to 95% for products consumed daily compared to six years ago.

Claim 1:
There has been a price increase of 18% to 95% for products consumed daily compared to six years ago. Among all items, canned sardines registered the highest price hike of 95%.

Source: Insufficient money in people’s wallet as prices of daily goods keep rising, China Press, 21 Oct 2017 http://bit.ly/2ius5m5

Fact:
While some food items had increased by the specified magnitude compared to six years ago, the overall food category registered a price increase of 23%, which translates into a 3.7% increase per year. There are food items that registered smaller price increases over the past six years such as rice (1.7%), big onions (4.8%), and bread (5.3%) and fresh chicken (9.6%).

The rate of increase in prices should also be compared with income growth. The average household income rose by 6.2% per year between 2014-2016, faster than the increase in food prices of 4.5% during the same period.


Claim 2:
According to observation, several daily products that are no longer subsidised by the government have seen price hikes of close to 100% and 44% to 83% for food and beverages.

Fact:

The upward revision in prices of sugar in 2013 and the removal of subsidy for cooking oil in 2016 led to an increase of 26% and 48% in their prices respectively.

The Government continues to provide subsidies for other necessities such as cooking gas and toll. To help the vulnerable groups cope with rising cost of living, the Government also provided cash transfers such as the Bantuan Rakyat 1Malaysia (BR1M) and Bantuan Buku 1Malaysia.


Claim 3:
People’s purchasing power has not increased as both annual household income and expenditure rose about 6%, according to the income and expenditure report for 2016.

Fact:
While average household income rose by 6.2% per year in 2014-2016, consumer price index (CPI) increased by 2.1% during the same period. This suggests that on average, purchasing power has increased, as proxied by real household income growth. Based on the Household Income and Basic Amenities Survey 2016, average real household income grew by 4.2% per year. Income growth for the bottom 40% households at 5.8% was also higher than the growth in CPI.

The increase in CPI was also lower than the increase in household expenditure of 6%. This implies that the growth in expenditure was, to some extent, driven by an increase in the volume of goods and services consumed, contributing to improvement in the standard of living. Based on the Household Expenditure Survey 2016, household expenditure in real term rose by 3.9% per year.

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